• It has been a week of predominantly soft economic data releases garnished with some interesting details of the Fed and BoE minutes. But looking beyond the surface, we see no need to change our views of an ongoing (US & Asia) or upcoming (EMU) economic recovery, and major central banks sticking to their current policy course.
  • Next week's calendar is loaded with economic data. But they will all be dominated by the outcome of the general election in Italy to be held this Sunday/Monday. Bersani's center-left coalition will most probably win an outright majority in the Lower House, but could be forced to seek a post-election alliance with Monti's center coalition in the Upper House. This would be the most positive outcome for financial markets, as it would increase the probability that the favorable reform momentum will be maintained.
  • After having risen four months in a row, next week's global manufacturing PMI readings should take a breather – with China's HSBC/Markit PMI treading water (after today's disappointing EMU figure) and well-advanced US numbers facing a moderate setback. But beyond short-term fluctuations, the trend is up. Germany will profit the most from the turn in the global industrial cycle, thus paving the way for a gradual improvement in Europe further down the road.
  • Next Thursday, advance 4Q12 US real GDP growth will most likely be revised from -0.1% qoq saar to +0.2%, still the slowest pace of expansion since 1Q11. Higher net exports as well as consumer spending are the main drivers. And while lower-than-anticipated inventory investment will act as a drag on 4Q12 growth, it poses some upside risks to an otherwise rather modest (tax-related) current quarter expansion.
  • Given the still poor macro environment, we expect the Hungarian central bank to cut its policy rate once again next Tuesday by 25bp to 5.25% – followed by a final move to 5% in early spring.